A federal appeals court grilled the Trump administration on Wednesday over its bid to overturn a ruling that stopped it from gutting three small federal agencies the administration considered “unnecessary.”
In March 2025, President Donald Trump signed an executive order reducing several agencies, including the Minority Business and Development Agency, the Federal Mediation and Conciliation Service, and the U.S. Interagency Council on Homelessness, to the minimum staffing and size mandated by law, as part of sweeping cuts his administration made to the size of the federal government. The order was challenged by a coalition of Democrat-led states, leading a federal district court judge to strike down the order as unlawful. A three-judge panel on the U.S. Court of Appeals for the 1st Circuit heard arguments from the Justice Department and the coalition of Democratic states as the administration seeks to reverse that ruling.
DOJ lawyer Simon Jerome argued to the panel that the federal government should be allowed to reduce the agencies’ workforces and cut grants to the minimal amounts, rejecting the Democratic states’ claims that the executive order amounts to an unlawful closure of the agencies.
“The agencies are free to streamline their operations within the bounds of federal statutory law. I haven’t taken plaintiffs to disagree at any point during this litigation, yet the order in this case prevents the three agencies in the appeal from doing that by complying with Executive Order 14238, a facially valid executive order,” Jerome said.
The panel grilled Jerome on the DOJ’s arguments that the district court’s ruling, which reinstated grants and ordered employees who had been terminated via the executive order to be rehired, overstepped its authority under the law.
Ester Murdukhayeva, deputy solicitor general at the New York attorney general’s office, argued that the Trump administration had essentially closed the agencies based on how much the size of the agencies had been reduced, urging the panel to uphold the lower court’s ruling.
“The uncontested record in this case shows that defendants functionally shut down three congressionally created agencies by indiscriminately firing all or nearly all of their staff and ceasing to provide programs and services,” Murdukhayeva told the panel, adding that the 1st Circuit has ruled against the administration in similar cases regarding sweeping executive orders. “The district court correctly concluded that that was arbitrary and capricious, and defendants do not challenge that finding.”
The 1st Circuit panel did not indicate how or when it would rule. The three-judge panel included U.S. Circuit Judges Julie Rikelman, an appointee of former President Joe Biden; William Kayatta, an appointee of former President Barack Obama; and Seth Aframe, a Biden appointee. The Trump administration has faced several high-profile losses at the 1st Circuit, which is the most left-leaning federal appeals court in the country, but several of those losses have been successfully appealed to the Supreme Court.
FOURTH CIRCUIT WORRIED TRUMP’S US ATTORNEY APPOINTMENTS UNLAWFULLY CUT OUT SENATE
Among the agencies that the administration aimed to reduce in size and workforce, the Federal Mediation and Conciliation Service has long been a source of scrutiny for alleged waste and abuse in the federal government. The FMCS is mainly designed to mediate conflicts between labor unions and companies.
The largely unknown federal agency was found in the early 2010s to spend like “reigning kings,” spending government funds on painted portraits of each of the former agency heads, among other pricey expenditures. Trump’s March 2025 executive order did not single out the agency’s excesses but did say that the goal of his order was to eliminate “non-statutory functions” of “unnecessary governmental entities.”